Equity Research

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Equity Research December 14, 2021

BSE Sensex: 58283

ICICI Securities Limited is the author and distributor of this report

Real Estate

Sector update

Macrotech Developers (ADD)

Real Estate

Mud on the boots #2: Macrotech’s Palava project site visits

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Research Analyst:

Adhidev Chattopadhyay [email protected]

+91 22 6807 7451

We do channel checks. We do network checks. However, 15 years of experience has

taught this analyst that these checks have utility, if, and only if, it is supplemented

by in-person site visits to track execution progress and get a deeper understanding

of micro-markets. With the waning of the second Covid wave across India, it is our

endeavour to once again present execution progress across companies’ key

projects under our “Mud on the boots” series.

In the second edition of Mud on the boots, we present takeaways from our site visits

to Macrotech Developers’ (LODHA) Palava Phase I and II township project located in

the Navi Mumbai-Dombivali region in MMR’s extended eastern suburbs. The

company has made significant execution progress since FY10 with ~18,400 units

having been delivered in Phase I (fully sold) and ~16,450 units having been delivered

in Phase II since FY14 and another ~10,000 units set to be delivered between H2FY22-

FY26E. The company has recently launched a new phase in Palava located at the

Premier Compound along the Kalyan-Shil Road in Nov’21 which is estimated to have

overall developable area of 2.0msf with an estimated Gross Development Value

(GDV) of Rs12.2bn.

Palava, an integrated smart city: We visited Lodha’s Palava City project which is

located in the Navi-Mumbai Dombivali Region in the extended eastern suburbs of the

Mumbai Metropolitan Region (MMR). As per company, Palava City is an integrated

smart city that is being developed near Mumbai. The project is strategically located and

accessible by road from Mumbai using the Kalyan-Shil Road. It is also accessible by

multiple stations (including Nilje) on the Diva-Panvel Railway line. The Kalyan-Taloja

metro line is planned to have three stations within the larger land parcel. Palava is also

located near the under-development Navi Mumbai international airport. The project also

benefits from its close proximity to the IT and ITeS hubs of Vashi, Airoli, Dhirubhai

Ambani Knowledge City and Thane.

Project has seen strong execution progress: The company commenced residential

development in Phase I of Palava, spread over approximately 300 acres, in FY10. As of

30th Sep,’21, the company has completed 15.5msf of saleable area and sold 15.5msf

of saleable area of residential development in Palava Phase I and 18,413 units have

been handed over to customers in this phase. The company commenced residential

development in Phase II of Palava, spread over approximately 940 acres, in FY14. As

of 30th Sep’21, the company has completed 14.4msf of saleable area and sold 15.9msf

of saleable area of residential development in Palava Phase II. The company plans to

further develop 38.9msf of saleable area in Palava Phase II. The company has recently

launched a new phase in Palava located at the Premier Compound along the Kalyan-

Shil Road in Nov’21 which is estimated to have overall developable area of 2.0msf with

an estimated Gross Development Value (GDV) of Rs12.2bn.

Expect delivery of ~10,000 units in Palava between H2FY22-FY26E: Typically,

residential units in Palava have a ticket size of Rs4-7mn across 1/2/3BHKs and take

between 24-36 months for delivery from date of launch on a rolling basis and current

under-construction units in Phase II have scheduled delivery dates between Mar’22 to

Nov’25. We came away impressed with the pace of execution across various units in

Phase II and expect delivery of ~8,200 units under the Casa by Lodha/Lodha brand and

~1,800 units under the Crown-Lodha Quality Homes brand by FY26E.

INDIA

Real Estate, December 14, 2021 ICICI Securities

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Lodha Palava site visit takeaways

We visited Lodha’s Palava City project which is located in the Navi-Mumbai Dombivali

Region in the extended eastern suburbs of the Mumbai Metropolitan Region (MMR). As

per company, Palava City is an integrated smart city that is being developed near

Mumbai. The project is strategically located and accessible by road from Mumbai using

the Kalyan-Shil Road. It is also accessible by multiple stations (including Nilje) on the

Diva-Panvel Railway line. The Kalyan-Taloja metro line is planned to have three stations

within the larger land parcel. Palava is also located near the under-development Navi

Mumbai international airport. The project also benefits from its close proximity to the IT

and ITeS hubs of Vashi, Airoli, Dhirubhai Ambani Knowledge City and Thane.

Chart 1: Palava project location

Source: Company, Isec research

The company commenced residential development in Phase I of Palava, spread over

approximately 300 acres, in FY10. As of 30th Sep’21, the company has completed

15.5msf of saleable area and sold 15.5msf of saleable area of residential development

in Palava Phase I and 18,413 units have been handed over to customers in this phase.

Key common amenities for Phase I include two schools, a golf course, a football ground,

a cricket ground, a riverside promenade with amphitheatre, four grand clubhouses and

a temple.

The company commenced residential development in Phase II of Palava, spread over

approximately 940 acres, in FY14. As of 30th Sep’21, the company has completed

14.4msf of saleable area and sold 15.9msf of saleable area of residential development


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in Palava Phase II. The company plans to further develop 38.9msf of saleable area in

Palava Phase II. Key common amenities for Phase II include a sports complex, a multi-

disciplinary university, a family entertainment centre including a museum, schools,

grand clubhouses, multi-level car parks, a lakeside park, high street retail and dining,

Palava waterfront and temples. The company has recently launched a new phase in

Palava located at the Premier Compound along the Kalyan-Shil Road in Nov’21 which

is estimated to have overall developable area of 2.0msf with an estimated Gross

Development Value (GDV) of Rs12.2bn.

Typically, residential units in Palava have a ticket size of Rs4-7mn across 1/2/3BHKs

and take between 24-36 months for delivery from date of launch on a rolling basis and

current under-construction units in Phase II have scheduled delivery dates between

Mar’22 to Nov’25. We came away impressed with the pace of execution across various

units in Phase II and expect delivery of ~8,200 units under the Casa by Lodha/Lodha

brand and ~1,800 units under the Crown-Lodha Quality Homes brand by FY26E.

Apart from the residential component, the Palava project has offices with Phase I having

two office buildings with a total of 0.3msf of leasable Area, which have been completed

and partially leased out. In Phase II, the company plans to develop approximately

7.0msf of office space. The company has commenced office development in Phase II

and is developing the first 0.4msf of offices in Phase II. In the retail component, Phase

I has an operational mall with 0.4msf of leasable area. The company is also planning to

develop 0.1msf of high-street retail space in Phase II. Further, in Phase II, the company

plans to have a 20-acre entertainment centre that will be positioned as a family-focused

destination in the MMR.

Chart 2: Phase 2 elevation view Chart 3: Phase 2 elevation view

Source: Company data, I-Sec research. Source: Company data, I-Sec research.


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Chart 4: Phase 2 under construction Chart 5: Phase 2 under construction

Source: Company data, I-Sec research Source: Company data, I-Sec research

Chart 6: Phase 2 under construction

Chart 7: Phase 2 under construction



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Chart 8: Premier new launch site office

Chart 9: Premier launch customer interaction


Chart 10: Premier launch show flat

Chart 11: Premier launch show flat



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New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise)

BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return

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